26th Feb 2007 07:01
Ceramic Fuel Cells Limited26 February 2007 PRESS RELEASE 26 February 2007 CERAMIC FUEL CELLS LIMITED INTERIM RESULTS FOR THE PERIOD ENDED 31 DECEMBER 2006 Ceramic Fuel Cells Limited (AIM, ASX: CFU) ("the company"), a world leadingmanufacturer of energy products based on solid oxide fuel cells, today announcesinterim financial results for the six months ended 31 December 2006. Financial Highlights: • Revenue of A$2.5 million (H1 2005/6: A$0.5 million) • R&D expenditure of A$5.8 million (H1 2005/6: A$5.3 million) • Net operating cash outflow of A$7.8 million (H1 2005/6: A$7.1 million) • Net cash and financial assets at 31 December 2006 of A$75.1 million / £30 million (A$86.2 million at 30 June 2006) • Net loss of A$7.9 million (H1 2005/6: A$8.7 million) Operational Highlights: • Signed an exclusive, three way agreement with Gaz de France and De Dietrich for the French residential market • Established site for volume manufacturing facility on an industrial park in North Rhine Westphalia region of Germany owned and managed by Dutch energy company Nuon • Continued to make system improvements to increase efficiency, reduce size and optimise balance of plant components of fuel cell units • Granted three additional patents, one in the US and two in Europe, bringing the total to 29 patent families covering technology, processes, components and complete fuel cell systems • Appointed Bob Kennett as the Company's first UK-based non-executive director Since the period end: • Secured a site in Merseyside, UK, for the production of ceramic powders Brendan Dow, Managing Director of Ceramic Fuel Cells, said: "During the period we made significant progress towards the achievement of ourbusiness plan. The signing of an exclusive, three-way agreement with Gaz deFrance and boiler manufacturer De Dietrich addresses one of our key targetmarkets and demonstrates our ability to meet our strategic objectives onschedule. With the announcement of the proposed development of a fuel cellfoundry also in the period, we are on track to deliver commercial volume unitsto customers from 2009. We look forward to further positive developments in2007." A conference call for analysts will take place today at 08:30 GMT (7.30 pmMelbourne time). Please contact Sarah Richardson at Hogarth Partnership on +44(0) 20 7357 9477 or Andrew Neilson at Ceramic Fuel Cells on +61 419 950 771. For further information please contact: Ceramic Fuel CellsAndrew Neilson Tel: +61 419 950 771Brendan Bilton Tel: +44 (0) 7798 554 191 Email: [email protected] ------------------------------ Hogarth Partnership Tel: +44 (0) 20 7357 9477Nick Denton / Sarah MacLeod / Sarah Richardson Libertas Capital Tel: +44 (0) 20 7569 9650Aamir Quraishi/Andrew Hardy Additional documents that have been released to the Australian Stock Exchangeare available to view at the Company's website www.cfcl.com.au. CHAIRMAN'S REVIEW Commercialisation and Market Development The Company continued its field trials of micro Combined Heat & Power (m-CHP)units with customers in New Zealand, Australia and Germany. The Company alsodelivered one NetGenTM unit to its customer EWE in Germany, under the order forten units placed by EWE in June 2006. The remaining units will be deliveredduring the calendar 2007 year. Work also continued under the Letter of Intent(LOI) signed with EWE on a project to commercialise fuel cell based micro-CHPsystems for the German residential market. The Company continued to pursue opportunities with other prospective customersand partners in its initial target markets. In December 2006 the Company executed a product development agreement with Gazde France and De Dietrich Thermique, to collaborate on an exclusive basis todevelop a fully integrated m-CHP unit for the French residential market. Underthe terms of the agreement, the parties will define the specifications andrequirements for a m-CHP appliance for the French market. De Dietrich Thermiquewill integrate the Company's fuel cells into their condensing boiler platformsand Gaz de France will then conduct a test programme of the prototype todemonstrate the unit's efficiency, reliability and incorporation into theelectricity grid. Manufacturing During the period the Company progressed its plans to develop a large-scale fuelcell manufacturing facility. After conducting due diligence on several sites, inDecember 2006 the Company announced that it would locate its facility at theOberbruch industrial park in Heinsberg, Germany. The government of the State ofNorth Rhine-Westphalia is supporting the project with funding of €3.2 million. Work on the manufacturing plant will run in two phases. The first phase isscheduled to be completed during 2009 and will involve the installation of asemi-automated production line in an existing building in the industrial park.The production line is designed to produce up to 50,000 1kW fuel cell stacks peryear in a continuous 24/7 operation. The second phase will involve theinstallation of three additional fully automated production lines designed toproduce up to 150,000 units per year in a new purpose-built factory adjacent tothe existing building. During the half year the Company executed a lease for theexisting building for phase one and secured an option to buy the 'greenfield'land for phase two. The Company also commenced discussions with local financeproviders regarding the funding of the project. The Company also progressed its plans for a plant to make high quality ceramicpowders using the Company's proprietary processes. During the half year theCompany, together with specialist advisors Sinclair Knight Merz, refined thedesign of the plant, ordered equipment for the plant and conducted due diligenceon suitable sites. To validate the design and to reduce the installation andscale up risk of the plant, during the half year the Company also built ademonstration plant in Melbourne which has successfully produced zirconia powderto the Company's specifications. Since the half year end, the Company hassecured a site for the plant on an industrial park in Bromborough, Merseyside,UK. During the period the Company continued to upgrade its manufacturing plant andexpand its capacity at Noble Park, Melbourne, to make the Company's newmetal-ceramic fuel cells and 'balance of plant' components. The upgradedequipment ordered during the period includes a new semi-continuous furnace, QCequipment suitable for continuous operation, furnaces for metal coatings andautomated dispensing equipment for advanced seals. During the half year the Company hired two senior managers in the United Kingdom, and appointed Mr Bob Kennett as its first UK-based non executivedirector, consistent with the Company's focus on the European market. Technical Achievements During the half year the Company announced that it had developed its nextgeneration of fuel cells. These cells have demonstrated significant performanceimprovements, particularly in power density. The new fuel cell and re-designedsystem components are designed to optimize the efficiency of the fuel cell stackand reduce the system cost in preparation for volume manufacture. During the half year the Company manufactured and tested individual cells andfuel cell stacks. The Company also manufactured new balance of plant componentsto operate with the new metal-ceramic stacks. The Company plans to make the new1kW stacks from April 2007. The new stacks and balance of plant components willbe integrated into NetGenTM units to be delivered to customers during thecalendar 2007 year. The Company continued to develop its intellectual property portfolio. During theperiod the Company was granted three additional patents. The first of these patents was granted in the USA for a zirconia window frame, astructure which enables anode supported solid oxide fuel cells (connected bymetallic plates) to be flatter and easier to seal. The Company has already beengranted patents for the same invention in Australia and South Africa and hasapplied for patents in Canada, Europe and Japan. The second patent was granted in Europe for an electrically conductive metalsurface treatment for a ceramic-metallic solid oxide fuel cell design. Thepatent has already been granted in Australia and the USA and the Company hasapplied for patents in five other countries. The final patent granted in the period was a European patent for the use ofaluminium-iron alloys for fuel cell system components. The alloys, which arehighly corrosion resistant and inexpensive to produce, can be used in 'balanceof plant' components of a fuel cell system. Patents have been granted for thisinvention in Australia and South Africa and are pending in other countries. At the end of the period the Company has 29 patent families, covering a broadrange of inventions, from ceramic powder processing and solid oxide fuel celltechnology, to balance of plant components and complete fuel cell systems. Operating Results The Group's revenue increased significantly during the period due to increasedinterest income earned on funds arising from the capital raising undertaken inMarch 2006. As discussed above the Group continues to advance its technology and productdevelopment objectives. Expenditure on Research & Product Development activitiesduring the period increased by 8.6% to A$5.8m. Expenditure on Sales and Marketing of A$1.0m was A$0.4m higher than thecorresponding prior period. This increase arises from the expansion of theGroup's European commercialisation activities, in line with the Company'sstrategy. The initial results of these activities are reported above. Expenditure in the General and Administrative function area has increased fromA$2.8m to A$3.7m for a number of reasons: • Foreign exchange losses of A$0.4m - arising predominantly on the translation of foreign currency investments to Australian dollars - have been included in this expense category. The Group's treasury investment policy is explained further below. • As part of its long-term incentive programme, during the period the Directors issued share options to management and staff under the Company's share option plan. This has resulted in an increased expense during the current period of A$0.2m. • The Group has increased its corporate activities in Europe. This included work associated with the selection of the fuel cell manufacturing site in Germany, the securing of funding from the government of the State of North Rhine-Westphalia and regulatory, governance and investor relations activities associated with being listed on the AIM market. During the six month period ended 31 December 2006 the Group continued todevelop and commercialise its fuel cell technology. The net loss for the periodof A$7.9m was down by A$0.7m from the equivalent period in 2005 due largely toincreased interest revenue and the elimination of borrowing costs, which werepartially offset by increased costs associated with the expansion of itsbusiness activities. The loss for the period was lower than the Group's internalbudgets. Financing Activities At 31 December 2006 the Group had Cash and Financial Assets amounting toA$75.1m. The Group invests these funds in accordance with its treasury investment policyand risk management programme. The Group operates internationally and holdsforeign currency funds that are intended to be used in the construction andoperation of its planned European businesses. As the Group holds its cash inseveral currencies to cover forecast expenditure, but reports its income inAustralian dollars, foreign exchange movements will affect the Company'sreported earnings. During the reporting period this exposure was principally toPounds Sterling and Euros. The Group's current policy is to not hedge this foreign currency translationrisk (other than the 'natural' hedge of holding cash in the same currency asexpected expenditure). During the period this gave rise to a translation loss ofA$0.4m, which is reported in the General and Administrative costs above. (Bycomparison, in the year to 30 June 2006, the Group's income included atranslation gain of A$2.8m.) Risk management During the half year the Company focused on managing the key risks facing theCompany. Like other fuel cell developers, the Company must make fuel cells that workreliably and efficiently, in real world conditions. The Company continues tomitigate this technical risk by focused research and product development,rigorous testing and benchmarking, and by developing a broad technology andintellectual property portfolio. At a strategic level, there is a commercial risk that target customers (such asenergy utilities) and development partners (such as appliance makers) mayprotect their existing technologies or products by resisting new technology suchas fuel cells. The Company mitigates this risk by choosing to work with a smallnumber of customers and partners that are committed to distributed generationand fuel cells. Another risk for fuel cell companies is to ensure that consistent materials andmanufacturing processes deliver high quality, low cost cells. The Company ismeeting this operational challenge by building its own ceramic powder plant,using the Company's proprietary processes. The Company will also continue towork with suppliers of key materials and components to formalise the Company'ssupply chain and optimise manufacturing processes, particularly as the Companyscales up to volume manufacturing. During the coming year the Company will continue to focus on mitigating theserisks, together with the key risks of the Company's capital works program,particularly the fuel cell manufacturing plant. The Company will continue toreport to shareholders on the key risks facing the Company, including in theannual report for the year ending 30 June 2007. Consolidated Income StatementFor the half-year ended 31 December 2006 Half-year Notes 2006 2005 A$ A$ Revenue from continuing operations 3 2,522,591 505,525 Other income 4 3,895 36,716Research & Product Development (5,774,788) (5,319,443)General & Administration 5 (3,706,198) (2,786,243)Sales & Marketing (986,125) (617,273)Borrowing costs - (506,313) ------------- -------------Loss before income tax (7,940,625) (8,687,031) Income tax expense - - ------------- -------------Loss for the half-year attributable tomembers of Ceramic Fuel Cells Limited (7,940,625) (8,687,031) ------------- ------------- Cents Cents Earnings per share for lossattributable to the ordinary equity holders of the companyBasic and diluted earnings per share 7 (2.57) (7.76) The above consolidated income statement should be read in conjunction with theaccompanying notes. Consolidated Balance SheetAs at 31 December 2006 31 December 30 June 2006 2006 A$ A$ASSETS Current AssetsCash and cash equivalents 3,313,565 11,367,347Trade and other receivables 338,290 110,859Financial assets 11,856,632 30,087,872Other 345,954 269,200 ------------- -------------Total Current Assets 15,854,441 41,835,278 ------------- ------------- Non-Current Assets Financial assets 59,906,835 44,661,266Plant and equipment 4,608,889 2,090,618Intangibles 1,000 1,000 ------------- -------------Total Non-Current Assets 64,516,724 46,752,884 ------------- ------------- Total Assets 80,371,165 88,588,162 ------------- ------------- LIABILITIES Current LiabilitiesTrade and other payables 1,219,611 1,330,551Provisions 863,821 869,179Deferred (unearned) revenue 417,819 537,984 ------------- -------------Total Current Liabilities 2,501,251 2,737,714 ------------- -------------Non-Current LiabilitiesProvisions 87,510 96,497 ------------- -------------Total Non-Current Liabilities 87,510 96,497 ------------- ------------- Total Liabilities 2,588,761 2,834,211 ------------- -------------Net Assets 77,782,404 85,753,951 ============= ============= EQUITY Contributed equity 185,519,327 185,549,893Reserves 98,840 99,196Retained losses (107,835,763) (99,895,138) ------------- -------------Total Equity 77,782,404 85,753,951 ============= ============= The above consolidated balance sheet should be read in conjunction with theaccompanying notes. Consolidated Statement of Changes in EquityFor the half-year ended 31 December 2006 Half-year 2006 2005 A$ A$ Total equity at the beginning of the half-year 85,753,951 7,829,352 ------------- ------------ Changes in the fair value of financial assets (222,927) -Exchange differences on translation of foreignoperations (25,911) (3,465) ------------- ------------Net expense recognised in equity (248,838) (3,465) Loss for the half-year (7,940,625) (8,687,031) ------------- ------------ Total recognised expense for the half-year (8,189,463) (8,690,496) ------------- ------------ Transactions with equity holders in theircapacity as equity holders: Contributions of equity (net of transaction costs) (30,566) 1,330,000 Employee share options 248,482 10,350Value of conversion rights on issue of 10%convertible notes - 1,398,339 ------------- ------------ 217,916 2,738,689 ------------- ------------ Total equity at the end of the half-year 77,782,404 1,877,545 ------------- ------------ Total recognised income/(expense) for the half-year is entirely attributable to members of Ceramic Fuel Cells Limited. The above consolidated cash flow statement should be read in conjunction withthe accompanying notes. Consolidated Cash Flow StatementFor the half-year ended 31 December 2006 Half-year 2006 2005 A$ A$Cash Flows from Operating ActivitiesReceipts from customers (inclusive of goods and services tax) 599,177 533,809 ------------- -------------Payments to suppliers and employees (inclusive of goods and services tax) (10,041,584) (7,927,613) ------------- ------------- (9,442,407) (7,393,804)Interest received 1,679,956 228,437Other revenue 3,693 24,060Interest paid - (522) ------------- -------------Net cash inflow (outflow) from operating (7,758,758) (7,141,829)activities ------------- ------------- Cash Flows from Investing ActivitiesProceeds from sale of plant and equipment 227 64,440Payments for plant and equipment (3,091,180) (90,619) ------------- -------------Net cash inflow (outflow) from investing (3,090,953) (26,179)activities ------------- ------------- Cash Flows from Financing ActivitiesGross payments for financial assets (71,869,625) -Gross proceeds from disposal of financial assets 75,053,491 - ------------- -------------Net proceeds from financial assets 3,183,866 - Share issue costs (30,566) (857,427)Repayment of borrowings - (63,117)Interest paid on borrowings - (2,649)Proceeds from issuing convertible notes - 8,200,000Convertible note issue costs - (531,815)Interest paid on convertible notes - (294,332) ------------- -------------Net cash inflow (outflow) from financing 3,153,300 6,450,660activities ------------- ------------- Net decrease in cash and cash equivalents (7,696,411) (717,348)Cash and cash equivalents at the beginning ofthe half-year 11,367,347 5,470,018Effects of exchange rate changes on cash andcash equivalents (357,371) - ------------- -------------Cash and cash equivalents at the end of thehalf-year 3,313,565 4,752,670 ============= ============= The above consolidated cash flow statement should be read in conjunction withthe accompanying notes. Notes to the Consolidated Financial StatementsFor the half-year ended 31 December 2006 Note 1. Basis of Preparation of Half-Year Report This general purpose financial report for the interim half-year reporting periodended 31 December 2006 has been prepared in accordance with Australianequivalents to International Financial Reporting Standards (AIFRS), and inparticular with Accounting Standard AASB 134 Interim Financial Reporting and theCorporations Act 2001. Compliance with AIFRS ensures that the consolidatedfinancial statements and notes of Ceramic Fuel Cells Limited comply withInternational Financial Reporting Standards (IFRS). This interim financial report does not include all the notes of the typenormally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report forthe year ended 30 June 2006 and any public announcements made by Ceramic FuelCells Limited during the interim reporting period in accordance with thecontinuous disclosure requirements of the Corporations Act 2001. The accounting policies adopted are consistent with those of the previousfinancial year and corresponding reporting period. Note 2. Segment Information Primary reporting format - geographical segments Australia Europe Consolidated A$ A$ A$Half-year2006Segment revenue 57,781 206,043 263,824 ----------- ----------Unallocated revenue and other income 2,262,662 ----------Total revenue and other income 2,526,486 ---------- Segment result (9,781,896) (421,391) (10,203,287) ----------- ----------Unallocated revenue less unallocatedexpenses 2,262,662 ----------Loss before income tax (7,940,625) ---------- Half-year2005Segment revenue 134,856 137,617 272,527 ----------- ----------Unallocated revenue 257,058 ----------Total revenue and other income 529,585 ---------- Segment result (7,786,779) (378,469) (8,165,248) ----------- ----------Unallocated revenue less unallocatedexpenses (521,783) ----------Loss before income tax (8,687,031) ---------- Notes to the Consolidated Financial StatementsFor the half-year ended 31 December 2006 Half-year 2006 2005 A$ A$Note 3. Revenue From continuing operationsSales revenueField trial income 247,106 200,052Licensing income 16,718 72,475 ---------- --------- 263,824 272,527Other revenueInterest 2,258,767 232,998 ---------- ---------Total revenue from continuing operations 2,522,591 505,525 ========== ========= Note 4. Other Income Net gain on disposal of plant and equipment 202 12,656Sundry income 3,693 24,060 ---------- ---------Total other income 3,895 36,716 ========== ========= Note 5. Expenses The loss for the half-year includes the following specificGeneral & Administrative expense: Net foreign exchange losses 359,958 3,551 These losses predominantly relate to the translation of cash and financialassets, held in foreign currencies, back into Australian dollars (the functionalcurrency of the parent entity). The Group operates internationally and holdsforeign currency funds which are intended to be used in the construction andoperation of planned European businesses. Note 6. Contingent Liability The consolidated entity has the following contingent liability: R&D Start Grant Under an agreement with the Industry Research and Development Board (IR&D Board)acting on behalf of the federal government, the company received a A$15 milliongrant under the R&D Start Grant programme. The company has received the fullamount of the grant. The agreement runs until 2009 and imposes certainobligations upon the company. If the company was to breach the agreement orbecome insolvent, the IR&D Board may elect to terminate the agreement. In theevent of such a termination, or in other specific circumstances, the agreementprovides that the IR&D Board may choose to require the repayment of any or allof the grant with or without interest. At the end of the half-year the maximum amount of this liability would have beenA$22.05 million. Notes to the Consolidated Financial StatementsFor the half-year ended 31 December 2006 Half-year 2006 2005 A Cents A Cents Note 7. Earnings Per Share Basic and diluted earnings per share (2.57) (7.76) Number NumberWeighted average number of shares Weighted average number of shares used as thedenominator in calculating basic and diluted earnings per share 309,505,559 111,916,231 A$ A$Earnings used in calculating basic and dilutedearnings per share Loss attributable to the ordinary equityholders of the company (7,940,625) (8,687,031) There were no extraordinary items, nor net loss attributable to outside equityinterests, to be taken into account in determining earnings used in calculatingbasic and diluted earnings per share. Information concerning the classification of securities All options issued will be anti-dilutive until such time as the Group generatesprofits, rather than losses, hence all options have been excluded from thecalculation of diluted earnings per share. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Ceramic Fuel Cells